Standard Life Investments Global Absolute Return Strategies, Invesco Perpetual High Income and LF Woodford Equity Income were among the most sold funds last year, according to data from FE Analytics.
A look at the top 25 most sold funds of last year shows that investors cooled on their UK investments despite the economy and market outperforming – albeit low – expectations.
Yet, continued uncertainty about the post-Brexit landscape and political uncertainty led investors to withdraw £2.4bn from UK equity funds during the first 11 months of 2017.
Despite more bearish sentiment, the FTSE All Share returned a respectable 13.1 per cent last year as consumer-driven demand continued to buoy the economy and boost growth.
From an active management perspective, the average IA UK All Companies sector outperformed the index by 89 basis points, while funds in the IA UK Equity Income sector underperformed by 1.78 percentage points.
However, both sectors underperformed the index in 2016 leading some investors to sell out of active funds at the start of the year.
Table of most bought funds in 2017
Source: FE Analytics
The most sold UK fund over the course of the entire year was FE Alpha Manager Mark Barnett’s four FE Crown-rated Invesco Perpetual High Income fund.
The portfolio underperformed last year, returning just 5.38 per cent, a bottom quartile performance in the IA UK All Companies sector.
This followed on from a disappointing 2016, meaning the fund has spent the last two calendar years in the bottom quartile of the sector, and has underperformed the sector by 18.74 per cent since the start of 2016.
The fund saw its assets under management (AUM) fall from £11.3bn to £10.2bn last year despite performance adding £401m as £1.4bn was pulled out by investors.
His Invesco Perpetual Income fund also makes the list, having lost £982m in net outflows over the year after performance has been stripped out, taking its AUM from £5.6bn to £4.9bn.
Barnett took over the funds from fellow FE Alpha Manager Neil Woodford who saw his own LF Woodford Equity Income fund also make the list.
The Woodford fund saw AUM fall from £11.3bn to £10.2bn over the course of the year with £1.3bn in outflows after delivering the worst total return of the sector, 0.79 per cent.
Performance of funds vs sector and benchmark in 2017
Source: FE Analytics
Much of the selling came in the second half of the year as a number of stock-specific issues including Provident Financial, which sold off aggressively in the summer, affected performance.
Others included Allied Minds, AstraZeneca and AA also sold off, contributing to poor performance. Former colleague Barnett was also hit by a number of the same issues in his portfolios.
Artemis Income also made the list of the most sold funds in 2017 despite outperforming its average peer in both 2016 and 2017. The fund saw £737m in outflows, negating its £606m performance benefit and taking its AUM from £6.4bn to £6.3bn.
M&G Recovery recorded £801m in net outflows as the value trade failed to materialise last year despite a strong end to 2016. Despite being one of the best performers in 2016, investors backed away from the fund last year as AUM fell from £3.4bn to £2.9bn.
AXA Framlington UK Select Opportunities rounds out the active portion of the list after two consecutive bottom quartile years in 2016 and 2017. The fund lost £922m in net outflows taking its AUM from £3.8bn to £3.2bn.
While not in the same sectors, the JOHCM UK Opportunities fund, which is in the IA Specialist sector, was another UK-focused fund that saw significant outflows.
The portfolio is run by managers Michael Ulrich and Rachel Reutter after long-time manager John Wood retired in September 2017.
Although the news was announced in March, £572m of £896m net outflows for the fund came in the second half of last year. Overall, the fund’s AUM halved from £1.8bn to £932m.
The most sold fund last year however resided in the IA Targeted Absolute Return sector as behemoth Standard Life Investments Global Absolute Return Strategies, more commonly known as GARS, saw net outflows of £4.9bn.
As mentioned in an article earlier this week, the fund has witnessed outflows as a number of competitor strategies from former GARS managers have launched, including Invesco Perpetual Global Targeted Returns and Aviva Investors Multi Strategy Target Return.
GARS recorded a loss in 2016 of 2.68 per cent, prompting some investors to sell out of the fund at the start of 2016, although it bounced back to deliver a total return of 2.34 per cent last year.
Yet, over the two-year period from the start of 2016 to the end of 2017 the fund lost investors 40 basis points, below the sector average and its Libor benchmark.
Performance of funds vs sector and benchmark in 2017
Source: FE Analytics
Managers were split on whether investors were right to sell out of the fund at the start of 2017, with Rob Burdett, co-head of the multimanager team at BMO Global Asset Management, noting that it was “an aggressive, wrong response”.
However, outflows continued throughout the course of the year, losing £2.3bn in the second half of the year.
The second-most sold fund was the five FE crown-rated Stewart Investors Asia Pacific Leaders run by Sashi Reddy and FE Alpha Manager David Gait.
The fund lost £1.9bn in AUM over the course of the year although positive performance of £1.1bn limited the impact as overall AUM fell from £9.2bn to £8.5bn.
The strategy is more defensive in nature and as such has lagged the equity market over the last few years as the market has rallied.
Indeed, the fund delivered a total return of 1.94 per cent in 2015 when the benchmark MSCI AC Asia Pacific ex Japan index lost 4.12 per cent.